Property Insurance

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For insurance recovery attorneys, one of the more frustrating ways for a policyholder to lose coverage for a property loss is on the basis of late notice. Property insurance policies generally require the policyholder to give the insurance company “prompt notice” of claims and potential claims. Property policies may specify a timeframe in which the policyholder must give notice, but in many cases do not. New York courts routinely hold that short delays, even as little as one to two months, suffice as a basis to deny coverage where the policy has “prompt notice” requirements. Under New York law, however, an insurance company can waive its late notice defense by not raising it explicitly when it finally disclaims coverage. Indeed, recently, a federal court in New York court rejected the insurance company’s late notice defense, even where the policyholder conceded that it did not provide prompt notice as a matter of law, because the insurance company failed to explicitly deny coverage on that ground.

Summary of recent New York federal court decision

In Mave Hotel Investors LLC v. Certain Underwriters at Lloyd’s London, the plaintiffs (“Mave”) sought coverage for property damage at its hotel following the termination of its contract with a human services organization housing formerly homeless families with children at the hotel. No. 21-cv-08743 (JSR), 2023 U.S. Dist. LEXIS 62718 (S.D.N.Y. Apr. 10, 2023). Mave alleged that its rooms were damaged while the families were living there. The insurer, Certain Underwriters at Lloyd’s London (“Lloyds”), ultimately denied coverage the ground that any damage was caused by ordinary wear and tear, an excluded cause of loss. At trial, however, Lloyd’s moved for summary judgment, arguing among other things, late notice.Continue Reading An insurance company’s generic reservation of right can lead to a Waiver of a Late Notice Defense

How cryptocurrencies are viewed by courts can be determinative when seeking coverage for a cryptocurrency-related loss, and whether cryptocurrency is “money,” “securities,” or “property” has been the subject of heavy debate.

In our previous blog post, we explored how your current D&O and/or cyber insurance policies may provide coverage for crypto-related losses. In this article, we discuss whether and how coverage may also exist for certain losses under typical property and/or specie insurance policies.

Is cryptocurrency “property”?

When determining whether your loss of or inability to access your cryptocurrency is covered under your property and/or specie policy, the first question to ask is whether cryptocurrency constitutes covered “property.”

The Internal Revenue Service (“IRS”) has provided some guidance.  In March 2014, the IRS declared that “virtual currency”, such as Bitcoin and other cryptocurrency, will be taxed as “property” and not currency. See IRS Notice 2014-21, Guidance on Virtual Currency (March 25, 2014); see also IRS Has Begun Sending Letters to Virtual Currency, Internal Revenue Serv. (July 26, 2019), (“IRS Notice 2014-21 … states that virtual currency is property for federal tax purposes and provides guidance on how general federal tax principles apply to virtual currency transactions.”). Continue Reading Can property or specie insurance provide coverage for crypto losses?

Most residential property policies provide for an “appraisal” as an alternative dispute resolution mechanism when the insurer concedes coverage for a loss in whole or part, but the amount of the loss is disputed. The resulting appraisal award is binding on the parties absent certain limited grounds for challenging the award or the insurer’s obligation to pay it in full. Once issued, absent any cognizable challenge, an insurer must timely pay the award—often within 30 days by contract—subject to any applicable sub-limits, deductibles, or other policy limitations. Florida law has long held that where an insured is forced to file suit to compel appraisal or recover policy benefits and an appraisal later ensues, an insurer’s payment of the resulting appraisal award operates as a “confession of judgment”—the functional equivalent of a judgment in the insured’s favor sufficient to trigger the insured’s entitlement to attorneys’ fees and costs as the prevailing party under Sections 627.428 (for admitted insurers) or 626.9373 (for surplus lines insurers) of the Florida Statutes. Bryant v. GeoVera Specialty Ins. Co., 271 So. 3d 1013, 1019-20 (Fla. 4th DCA 2019); Jerkins v. USF & G Specialty Ins. Co., 982 So. 2d 15, 17-18 (Fla. 5th DCA 2008); Goff v. State Farm Florida Ins. Co., 999 So. 2d 684, 688 (Fla. 2d DCA 2008); Velez v. Scottsdale Ins. Co., No. 9:17-CV-81310, 2019 WL 7837204, at *2 (S.D. Fla. Aug. 2, 2019).

Historical lack of clarity and the source of confusion

Until recently, however, insureds had little guidance from Florida courts as to whether an insurer’s payment of an appraisal award also triggered Florida Rule of Civil Procedure 1.525’s  thirty-day deadline to file a motion for fees and costs, or whether the insured was first required to move for and await the entry of an actual final judgment. The lack of clarity stems from Rule 1.525’s triggering mechanism: resembling Section 627.428 in requiring the “filing of [a] judgment, including a judgment of dismissal, or the service of a notice of voluntary dismissal” but with the additional requirement that such judgment or notice “conclude[] the action as to that party.”Continue Reading Florida: the time to move for attorney’s fees post-appraisal

Part I: Policy options

This is the first part of a two-part blog series titled, “Music to my ears: Insurance coverage for musical instruments”. Part II covers exclusions, considerations, filing a claim, and tips.

Musical instruments can cost significant sums running from a few hundred or thousand dollars to a million dollars or more. And that is to say nothing of the special bond musicians have with their instruments (the authors are both amateur musicians, and when the violist even thinks her viola has been bumped while in its case, she feels as though her own person has suffered injury). Professional and amateur musicians, as well as collectors of highly valued or rare instruments, may require or desire insurance to protect their instruments from loss or damage.

Instrument insurance covers the instrument, and usually covers accessories like bows, sheet music, cases, bags, and stands, unless specifically excluded. High-value accessories should be individually listed on the policy.

Musicians may need coverage if the instrument is used routinely for performances or teaching, or if it travels to school, work, lessons, rehearsals, or concerts. Collectors with expensive and rare instruments may want coverage. Professional musicians may need a commercial musical instrument policy (discussed below) to limit the time they spend without their instrument if it needs repair, if they need to rent a temporary instrument while repairs are made or if they need to purchase a new instrument.

Musical instrument coverage can be customized, with policyholders choosing the amount of coverage they need and the amount of the deductible. Musical instrument carriers, which may be specialty insurers, frequently divide instruments into categories, and coverage may also include electronic instruments, recording equipment, and electronic gear.

Some policies have a maximum amount they will insure per instrument. Commercial musical instrument policies provide several valuation options, such as payment for a claim based on an agreed-upon value determined when the policy is placed, the instrument’s value, or its replacement value at the time of loss.

Coverage counsel can assist with placement, review, and renewal for musicians, collectors, and ensembles, and if valuation or coverage disputes arise in the event the unthinkable occurs.

Musical instrument coverage for amateur musicians

Amateur musicians are those who play a musical instrument (or several), but who do not receive compensation for playing the instrument, including people learning to play an instrument, and those who play as a hobby alone or in a group. A musician who makes any income from his or her playing is not an amateur for coverage purposes and may require business insurance.

Some homeowner’s or renter’s policies cover musical instruments, but they are subject to some limitations. Frequently, they contain limits for the home’s total property damage and may have applicable per-item limits or sub-limits for musical instruments, which may be lower than the musical instrument’s value. Many only cover damages occurring while the instrument is in the covered residence. Even when there is off-premises coverage, that amount is limited to 10 percent of the policy’s dwelling coverage limit, which may not cover the loss. Homeowner’s and renter’s policies only cover damage from “named perils” such as fire and theft, but not for unnamed perils. Typically, such policies only provide actual cost value, so it can be difficult to receive compensation for the instrument’s replacement value.Continue Reading Music to my ears: Coverage considerations for musical instrument insurance (Part I of II)

A concert promoter cancels a sold-out show of a world-renowned recording artist, reimbursing millions of dollars in ticket sales as a result.  If the reason for the cancellation was COVID-19, does insurance cover that?

Event Cancellation Insurance Basics

Event cancellation insurance generally provides coverage only when there has been a triggering event under the policy.  Some policies are written, for example, to only cover cancellations caused by rain or bad weather.  Other event cancellation policies are all-risk policies, meaning that coverage may be triggered by any cause that is not specifically excluded.  For all types of event cancellation insurance, the triggering event must have been fortuitous, or outside of the policyholder’s control.

Good News for Policyholders

The good news for policyholders is that many all-risk event cancellation policies do cover cancellations caused by COVID-19 related shut-down orders.  For such policies, a shut-down order should qualify as a fortuitous triggering event.  Across the United States, nearly every jurisdiction has enacted some kind of order that caused the cancellation of large-scale events.

Notes of Caution

Policyholders should be cautious concerning the scope of exclusions in respect of viruses and communicable diseases.  Although these types of exclusions may bar coverage related to COVID-19, it is important to be mindful of variations in the exclusion language used.  Some exclusions apply to only specific named viruses, such as SARS and MERS.  Other exclusions contain carve-outs that may be applicable to COVID-19.Continue Reading COVID-19 event cancellation insurance – good news and bad news

Faced with mounting claims for insurance coverage as a result of the novel coronavirus (COVID-19) outbreak, commercial insurers are likely to search for any policy provision that they think will enable them to avoid paying virus-related claims.  One provision that insurers ultimately may invoke in an attempt to deny such claims is the so-called “pollution exclusion” – an exclusion that can be found in both commercial general liability (CGL) insurance policies and property insurance policies.  Policyholders should anticipate such an argument and should not walk away from insurance claims just because of it.  Although the exclusion is often broadly worded, there is generally good reason not to read it to preclude coverage for third-party claims and/or first-party losses involving viruses, including COVID-19.

While the exact language of the pollution exclusion may differ from one policy to another, it typically provides that there is no insurance for “bodily injury” and/or “property damage” that “would not have occurred in whole or in part but for the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of ‘pollutants’ at any time.”  Again, while its precise definition can vary among policies, “pollutant” is typically defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste.”Continue Reading Pollution exclusion should not preclude coverage for virus-related claims

As reported extensively in the media over the past week, the cannabis industry has been hit hard by recent natural disasters. While companies doing business in this industry may face some unique challenges in purchasing insurance, and when attempting to obtain coverage for losses, insurance coverage – contrary to certain media reports – nevertheless may be available to them.  As such, cannabis-related companies should not just pass on submitting claims to their insurers when they experience losses.  Nor should they reflexively forego obtaining insurance in the first place.

Recent media reports

Both the Northern California wildfires and Hurricane Maria have caused extensive cannabis-related losses:

  • On October 13, 2017, The New York Times reported: “Fatal fires that have consumed nearly 200,000 acres in Northern California, devastating the region’s vineyards particularly in Napa and Sonoma Counties, are also taking a toll on a fledgling industry just months before its debut: recreational marijuana. Many of the region’s farms, including those that harvest cannabis, have been scorched, including those in Sonoma County and in Mendocino County, the center of California’s marijuana industry. Mendocino is one of three California counties that comprise [the] Emerald Triangle, where much of the United States’ marijuana is produced.”
  • On October 12, 2017, cnn.com reported: “Blazes have destroyed a number of farms in Mendocino County right before legal recreational sales begin in California.”
  • Also on October 12, 2017, the USA Today reported that “[m]arijuana farmers and dispensary owners across Northern California are nervously watching as wildfires burn through some of the state’s prime cannabis growing areas and destroy valuable crops ….”
  • On October 11, 2017, Marijuana Business Daily reported: “Hurricane Maria devastated Puerto Rico’s medical marijuana industry, setting back its development at least six months – if not much longer – and causing millions of dollars in damage to [medical marijuana] businesses. No outdoor marijuana cultivation facilities survived ….”

Often citing industry insiders, some of these publications have reported that insurance is not available to cover cannabis-related losses. The New York Times, for example, reported that “reliable insurance [is] difficult to acquire.”  Other publications went further, stating categorically that no insurance is available to the cannabis industry.  CNN reported:  “Cannabis cultivators cannot insure their businesses because federal law prohibits marijuana, which means that financial institutions can’t go near it.”  Likewise, the USA Today reported that “pot growers can’t get crop insurance like traditional farmers ….”
Continue Reading In Wake of Disasters, Do Not Just Assume No Coverage Available for Cannabis-Related Losses

The Buffalo, New York area has been devastated with record level snowfalls causing widespread damage. Now that the snow has stopped falling, warmer weather and potentially heavy rainfall may cause flooding and will likely exacerbate the losses being experienced. This will complicate insurance claims because policyholders will inevitably face pushback from insurance companies regarding the extent of damage from the snowstorms versus subsequent flooding.
Continue Reading The End of the Snow Is Still Not the End of the Problems For the Buffalo, NY Area